Numbers Do Lie When They're Used by Pension Busters


Posted on 06 April 2011

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By Paul Weber
Los Angeles Police Detective League

IN a courtroom, you have to swear to "tell the truth, the whole truth, and nothing but the truth." But public pension opponents, perhaps because they aren't under oath, have no trouble distorting and making up statistics to bolster their arguments.

The masters of the "half-truth" attack on these pensions are former Gov. Arnold Schwarzenegger, his pension-funding "special advisor," David Crane, Northwestern University Professor Joshua Rauh and now the Little Hoover Commission.

Schwarzenegger and Crane started off by repeatedly touting the claim that public pension costs had risen 2,000 percent since 1999. To make this assertion they cherry picked 1999, the year when California made its lowest-in-decades contribution ($159 million) to CalPERS, the California Public Employees Retirement System. The contribution figure was very low because the calculation starting point used was at the tail end of a four-year "pension holiday," during which CalPERS investment earnings were substituted for the required contributions.

In the years before the pension holiday, the state's contribution reached $1.2 billion. But Crane used 1999, which allowed him to make the grossly misleading claim that California would have to greatly increase its future CalPERS contributions to meet pension obligations.

Not content with their misleading, pension opponents cleverly decided to rent the good name and reputation of Stanford University to evaluate the "true unfunded" liability of California pensions. They paid a few Stanford graduate students and their advisors to create a "study" that cut by half the assumed return rate of the pension funds in its projections. Since the funded status of public pension plans are determined by their assumed return rate, cutting this rate in half would make the unfunded liabilities soar.

Next we have an associate professor at Northwestern University named Joshua Rauh who admits he'd like to see public pension plans ended. He published a non-peer-reviewed paper that purported to show that the unfunded liabilities of pension funds across the nation were dramatically higher than had been reported.

Rauh then claimed to establish when pension funds would run out of money. Rauh could not point to a single California pension fund that had failed in the past, or that had stated it would refuse to make future payments. While the critical facts unraveled the premise of his paper, it hasn't stopped Rauh from his unrelenting assault on public pensions.

Rauh has become the driving force behind the deceptively named "Public Employee Pension Transparency Act." The legislation's author, Central Valley Republican Rep. Devin Nunes, recently admitted to a gathering of public pension plan opponents that the real goal of his bill was to provide the cover to "set up" a move to "get away from the defined-benefit (public pension) plan and somehow get to a defined-contribution (401(k)-style plan)."

Now, the most recent attack on public pensions that failed at telling the "whole truth" came courtesy of the Little Hoover Commission. A report issued by this commission purported to analyze the unfunded liability of the 10 biggest pension systems in California. However, the commission intentionally used 2009 data for the biggest three funds, but used 2010 numbers for the other seven systems. It wasn't that 2010 data for the three largest systems was unavailable; the data was indeed available. The apparent reason for this incongruent comparison was that using the stale 2009 data from the three biggest systems would yield a reported deficit that was $33 billion higher.

With all their dishonest evaluations, public pension opponents are doing a very good job of living up to the adage that "statistics never lie, but liars use statistics."

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Paul M. Weber is president of the Los Angeles Police Protective League, the organization representing more than 9,900 LAPD officers. This originally appeared in the Los Angeles Daily News, and is available here: http://www.dailynews.com/opinions/ci_17770596

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